IMF highlights Saudi Arabia's economic, fiscal progress
As part of the 2025 Article IV consultation with Saudi Arabia, the International Monetary Fund released a concluding statement summarizing its preliminary findings following the recent mission to the Kingdom.
The IMF commended the significant progress in Saudi Arabia's ambitious economic transformation, highlighting the impact of far-reaching fiscal and macroeconomic policies, along with comprehensive reforms to fiscal and business regulations, which have driven strong growth in the non-oil sector.
It emphasized the Kingdom's strong economic and financial position, supported by the continued success of its economic plans and fiscal policies in maintaining financial stability and fostering growth — despite ongoing geopolitical tensions, trade disruptions, and global uncertainty.
The IMF also highlighted that Saudi Arabia's economy has demonstrated strong resilience to shocks, with expanding non-oil economic activities, contained inflation, and unemployment at record-low levels.
Although lower oil revenues and investment-related imports have resulted in twin deficits, external and fiscal buffers remain strong. Maintaining a higher-than-budgeted fiscal stance in 2025 is appropriate to avoid procyclical tightening that could amplify the growth impact of lower oil prices.
Managing robust credit growth and resulting funding pressures will be critical to safeguarding systemic financial stability. Given heightened global uncertainty, sustained momentum on structural reforms remains essential to support non-oil growth and advance economic diversification.
The IMF's statement noted that non-oil real gross domestic product grew by 4.2 percent in 2024, primarily driven by private consumption and non-oil private investment, with retail, hospitality, and construction leading the growth.
The labor market maintained strong momentum, driving unemployment to a historic low of 7 percent in 2024, surpassing the original Vision 2030 target, which has since been revised down to 5 percent. The labor market showed broad-based improvements, with youth and female unemployment rates halving over the past four years.
Despite a slight rise to 2.3 percent in April 2025, headline inflation remains low, supported by elevated real interest rates.
The current account shifted to a narrow deficit, moving from a surplus of 2.9 percent of GDP in 2023 to a deficit of 0.5 percent in 2024. This mainly reflects a decline in oil export proceeds, higher imports of machinery and equipment, and stronger remittance outflows — factors that more than offset a surge in tourism inflows.
The current account deficit has been financed through external borrowing and reduced FX asset accumulation. As a result, the Saudi Central Bank's net foreign asset holdings stabilized at $415 billion by end-2024 — equivalent to 15 months of imports and 187 percent of the IMF's reserve adequacy metric.
Regarding the Kingdom's economic outlook and risks, the IMF highlighted that robust domestic demand, including government-led projects, will continue to drive growth despite heightened global uncertainty and a weakened commodity price outlook.
Non-oil real GDP growth is projected at 3.4 percent in 2025, about 0.8 percentage points lower than in 2024. This reflects ongoing Vision 2030 projects through public and private investment, as well as strong credit growth, which will help sustain domestic demand and mitigate the impact of lower oil prices.
The direct impact of rising global trade tensions is limited, as oil products — making up 78 percent of Saudi Arabia's goods exports to the US in 2024 — are exempt from US tariffs, while non-oil exports to the US account for only 3.4 percent of Saudi Arabia's total non-oil exports.
Inflation is expected to remain anchored around 2 percent, supported by a credible peg to the US dollar, domestic subsidies, and an elastic supply of expatriate labor, despite a projected moderate positive output gap over the medium term. Imported inflation from increased tariffs worldwide is expected to remain contained.
Weaker oil demand, driven by heightened uncertainty, escalating global trade tensions, and deepening geoeconomic fragmentation, could dampen oil proceeds.
I believe the IMF has recognized the unprecedented economic transformation underway in Saudi Arabia, praising the country's strong financial resources and the significant reforms implemented across various sectors, including public finance.
It also highlighted the Kingdom's strong economic and financial position, supported by steady economic gains and sound fiscal strategies designed to preserve stability amid ongoing geopolitical tensions, trade disruptions, and global uncertainty.
Despite public debt reaching 26.2 percent of GDP, the IMF noted it remains low by international standards, reflecting the Kingdom's solid fiscal performance and preparedness for potential future shocks.
Recent investment initiatives — including the regulation enacted in February 2025 — are set to significantly enhance market liquidity and broaden shareholder participation in Saudi capital markets.
In conclusion, I believe these economic and financial achievements highlighted in the IMF's preliminary findings underscore the far-reaching impact of ongoing reforms, reaffirming Saudi Arabia's sustained progress in expanding opportunities for its citizens and bolstering long-term economic resilience.
• Talat Zaki Hafiz is an economist and financial analyst. X: @TalatHafiz
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